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BANGLADESH

Bangladesh, as an emerging developing country, is committed to raising revenue and achieving fiscal discipline with a view to increasing self-reliance. The external environment influencing the tax performance of Bangladesh has changed remarkably as the country became increasingly integrated with the global economy during the 1990s. In recent years, the Government of Bangladesh has initiated administrative and policy reforms in the tax system. An improved tax administration in association with pragmatic policy initiatives have resulted in a modest improvement in the tax-GDP ratio. However, the performance is still unsatisfactory as compared to other countries at a similar stage of economic development and needs to be improved together with more transparency of the tax system, especially with regards to the management of tax exemptions.

2015

2016

Detail view

PROGRESSIVE TAX SYSTEM

7

Bangladesh suffers from an extremely inefficient Value Added Tax system with many exemptions and rates. A new VAT and Suplementary duty Act will become effective in July 2016, which gives hopes for improvements. There is a necessity to introduce a reformed wealth tax system that would replace the current surcharge on wealth and that would create proper mechanisms to determine the true value of property and wealth of individuals.

Personal income tax & wealth taxes

9

Corporate income tax

4

Excise tax

10

Value added tax/sales tax

4

Import and export taxes

5

Presumptive/ turnover taxes

10

SUFFICIENT REVENUES

4

Bangladesh's performance in tax revenue generation is very poor as the tax to GDP ratio stands below 10%, one of the lowest in the world. Although there has been certain improvement in raising the tax to GDP ratio and in bringing more tax payers into the tax net, it has not been enough to fulfil the country's potential.

Tax revenues

5

Revenues from extractive industries

3

Tax payers

4

EFFECTIVE TAX ADMINISTRATION

4

Bangladesh's tax authority (NBR) suffers from an insufficient number of professional officers and although training programmes are in place, the skills of existing staff needs to be improved to properly tackle tax avoidance. The NBR also needs to adopt stricter measures to fight corruption.

Organization

5

Administration

6

Resources

7

Corruption

3

PRO-POOR PUBLIC SPENDING

3

There is an urgent need for Bangladesh to invest more into healthcare and education. The results show that it does not meet the international standards for neither healthcare nor education. There are no visible efforts to improve the situation as the investments into public services have not been raising in the past years. If citizens are to pay their taxes, the government must allocate more resources to improve the public services.

Components

10

Education

0

Healthcare

0

ACCOUNTABLE PUBLIC FINANCES

3

Bangladesh is lacking a meaningful mechanism to involve citizens in the policy making processes and provides only limited information about the tax system to the public. The government agencies need to ensure openness, reliability and timeliness of the tax related data and publish them in a user friendly manner. Without publicly available data on tax systems, it is difficult for the citizens and the civil society organizations to hold their government accountable.

Tax system transparency

3

Information availability on companies

3

Audit

3

Budget documentation

8

Citizens’ engagement

0

WELL GOVERNED TAX EXEMPTIONS

2

Curbing tax exemptions and making sure that all existing exemptions are approved by the Parliament and open to public scrutiny are extremely necessary in Bangladesh. The key to more effective management of tax exemptions is likely to lie in reduced discretionary powers, total transparency about the beneficiaries of the tax exemptions and in a stronger mandate for the revenue authority to implement and monitor all incentives and exemptions.

Governance

4

Transparency

0

PROGRESSIVE TAX SYSTEM

7

Bangladesh suffers from an extremely inefficient Value Added Tax system with many exemptions and rates. A new VAT and Suplementary duty Act will become effective in July 2016, which gives hopes for improvements. There is a necessity to introduce a reformed wealth tax system that would replace the current surcharge on wealth and that would create proper mechanisms to determine the true value of property and wealth of individuals.

Personal income tax & wealth taxes

9

Corporate income tax

4

Excise tax

10

Value added tax/sales tax

4

Import and export taxes

5

Presumptive/ turnover taxes

10

SUFFICIENT REVENUES

4

Bangladesh's performance in tax revenue generation is very poor as the tax to GDP ratio stands below 10%, one of the lowest in the world. Although there has been certain improvement in raising the tax to GDP ratio and in bringing more tax payers into the tax net, it has not been enough to fulfil the country's potential.

Tax revenues

5

Revenues from extractive industries

3

Tax payers

4

EFFECTIVE TAX ADMINISTRATION

4

Bangladesh's tax authority (NBR) suffers from an insufficient number of professional officers and although training programmes are in place, the skills of existing staff needs to be improved to properly tackle tax avoidance. The NBR also needs to adopt stricter measures to fight corruption.

Organization

5

Administration

6

Resources

7

Corruption

3

PRO-POOR PUBLIC SPENDING

3

There is an urgent need for Bangladesh to invest more into healthcare and education. The results show that it does not meet the international standards for neither healthcare nor education. There are no visible efforts to improve the situation as the investments into public services have not been raising in the past years. If citizens are to pay their taxes, the government must allocate more resources to improve the public services.

Components

10

Education

0

Healthcare

0

ACCOUNTABLE PUBLIC FINANCES

3

Bangladesh is lacking a meaningful mechanism to involve citizens in the policy making processes and provides only limited information about the tax system to the public. The government agencies need to ensure openness, reliability and timeliness of the tax related data and publish them in a user friendly manner. Without publicly available data on tax systems, it is difficult for the citizens and the civil society organizations to hold their government accountable.

Tax system transparency

3

Information availability on companies

3

Audit

3

Budget documentation

8

Citizens’ engagement

0

WELL GOVERNED TAX EXEMPTIONS

2

Curbing tax exemptions and making sure that all existing exemptions are approved by the Parliament and open to public scrutiny are extremely necessary in Bangladesh. The key to more effective management of tax exemptions is likely to lie in reduced discretionary powers, total transparency about the beneficiaries of the tax exemptions and in a stronger mandate for the revenue authority to implement and monitor all incentives and exemptions.

Governance

4

Transparency

0

0-2

2-4

4-6

6-8

8-10

unfair

fair

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